Hey so I have no idea how this capital stuff works. Like, if insurance capital comes from shareholders what do they do if they need more of it? Like if I own stock in an insurer will they send me a letter asking for cheques or what?
Good question for a DNGAF Friday.
I think the prospectus starts out with “You wan’ a piece o’ me?!?!?!?!!!”
Think they can issue debt or buy more reinsurance to protect the capital they currently have while cutting back on growth
Most stock companies will “own” their own stock. When they need more “capital,” they’ll sell those stocks.
When things are going well (and the price is low), they’ll “buy” back some of those stocks.
They may also do a “stock split” to help with buying/selling stocks to change their capital position.
I agree: this is a proper use of capitals. Even though you didn’t have to GAF, you did, indeed, GAF.
You’re looking at it backwards. It’s more like, this is how much capital we have. What/how much insurance does that allow us to write?
If you enter a capital-intensive line, you may have no choice but to limit how fast it grows, or buy reinsurance to limit the capital requirements.